Stablecoins: Dollar Engine or Financial Time Bomb?

Stablecoins are often considered the “boring” backbone of the crypto world—stable, predictable, and without the rollercoaster rides of Bitcoin or Ethereum. But behind their apparent simplicity, a heated debate unfolds: Are stablecoins a key to global dollar dominance or a ticking time bomb reminiscent of the 2008 financial crisis?

Explosive growth and close linkage with Treasuries

The stablecoin market has nearly doubled in size within a year and now stands at $280 billion. Most stablecoins, such as USDT and USDC, are backed by short-term US Treasuries. This close connection to Federal Reserve policy makes stablecoins a unique link between the crypto and fiat worlds.

Gracie Lin, CEO of OKX Singapore, emphasizes: “Stablecoins provide long-term price signals that go far beyond Fed Chairman Jerome Powell’s interest rate speculation.” By 2028, the market could grow to $1.2 trillion, which would require weekly Treasury purchases of $5.3 billion.

Opportunity or threat? Experts are divided

The optimistic view: A motor for the dollar

Proponents like Brian Brooks, former U.S. Comptroller of the Currency, see stablecoins as drivers of global dollar demand. The new GENIUS Act calls for 1:1 backing by Treasuries, which Brooks compares to the historic banking reforms that ended “wildcat banking” in the U.S. “Oversight creates certainty,” Brooks says. Every new token means more Treasuries are purchased, which strengthens the dollar’s global standing.

The skeptical warning: danger of a liquidity crisis

But not everyone shares this enthusiasm. Barry Eichengreen of UC Berkeley warns of a scenario reminiscent of 2008, when the loss of value of money market funds triggered a chain reaction. Similarly, if stablecoins experience massive outflows, they could force issuers to sell Treasuries, drying up liquidity and destabilizing markets. Eichengreen advocates for stricter regulations to prevent such chaos.

Stablecoins and the markets: A look at the numbers

Current market movements underscore the uncertainty. Bitcoin is holding above $111,300, Ethereum is gaining slightly to $4,320, and gold is reaching new highs at $3,540 per ounce – driven by expectations of Fed interest rate cuts and geopolitical tensions. The Nikkei 225 remains stable, supported by foreign investment and reforms in Japan.

A call to the blockchain community

Stablecoins are no longer a fringe phenomenon—they are shaping the future of finance. They offer the blockchain community an opportunity to develop innovative solutions, from better hedging models to decentralized alternatives. But without uniform standards, risks threaten to undermine the entire system.

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(Featured image by Dmytro Demidko via Unsplash)

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